NDLI: M/s Tata Motors Ltd. Vs. The Deputy Commissioner of Commercial Taxes (spl) & Anr.

Content Provider	Supreme Court of India
e-ISSN	30484839
Language	English
Access Restriction	NDLI
Subject Keyword	Sales Tax – Credit Note – Warranty Agreement
Content Type	Text
Resource Type	Law Judgement
Jurisdiction	India
Act(s) Referred	Central Sales Tax Act, 1956 (74 of 1956) Indian Contract Act, 1872 (9 of 1872) Sale of Goods Act, 1930 (3 of 1930)
Case(s) Referred	Referred Case 0 Referred Case 1 Referred Case 2 Referred Case 3 Referred Case 4 Referred Case 5 Referred Case 6 Referred Case 7 Referred Case 8 Referred Case 9 Referred Case 10 Referred Case 11 Referred Case 12 Referred Case 13 Referred Case 14 Referred Case 15 Referred Case 16 Referred Case 17 Referred Case 18 Referred Case 19 Referred Case 20
Case Type	Appeal
Court	Supreme Court of India
Disposal Nature	Reference Answered
Headnote	Sales Tax – Credit Note – Warranty Agreement – Whether, acredit note issued by a manufacturer to a dealer of automobiles inconsideration of the replacement of a defect ive part in theautomobile sold pursuant to a warranty agreement being collateralto the sale of the automobile is exigible to sales tax under the salestax enactments of the respective States – Observations made bySupreme Court in Mohd. Ekram Khan case wherein three otherjudgments of the Delhi High Court, Madhya Pradesh High Courtand Kerala High Court in Prem Nath Motors; Prem Motors and GeoMotors respectively were considered and the latter two judgmentswere overruled – Correctness of – Held: The judgment of in Mohd.Ekram Khan is applicable to a situation where a manufacturer issuesa credit note to a dealer acting under a warranty given by themanufacturer pursuant to a sale of an automobile in the followingsituations – The dealer replaces a defective part of the automobileby a spare part maintained in the stock of the dealer or when thesame is purchased by the dealer from the open market – In suchsituations, the credit note issued in the name of the dealer is avaluable consideration for a transfer of property in the spare partmade by the dealer to the customer and hence a sale within themeaning of the sales tax legislations of the respective States underconsideration – The value in the credit note is thus exigible to salestax under the respective sales tax enactments under consideration– The judgment in Mohd. Ekram Khan does not apply to a casewhere the dealer has simply received a spare part from themanufacturer of the automobile so as to replace a defective parttherein under a warranty collateral to the sale of the automobile –In such a situation also, the dealer may receive a consideration forthe purpose of the service rendered by him as a dealer under a dealership agreement or any other agreement akin to an agent ofthe manufacturer which is not a sale transaction – On the aboveunderstanding of the judgment in Mohd. Ekram Khan, the same doesnot call for any interference – In light of the above, overruling ofthe judgments in the case of Prem Motors and Geo Motors in Mohd.Ekram Khan, is just and proper – A credit note issued by amanufacturer to the dealer, in the situations explained above, is avaluable consideration within the meaning of the definition of saleand hence, exigible to sales tax under the respective State enactmentsof the States under consideration – Appellants-dealers/assesseesliable to pay sales tax under the respective State enactments underconsideration – Sale of Goods Act, 1930 – Central Sales Tax Act.Contract – Contract of sale – Elements to constitute a validcontract of sale – Discussed.Contract – Contract of sale differentiated from other contracts– Question whether a given contract is one of sale or a contract ofany other description is one of substance and not of form – Itdepends on the real meaning and nature of the contract.Contract – Contract of sale – Condition and warranty – Held:A condition is a stipulation essential to the main purpose of thecontract, the breach of which gives rise to a right to treat the contractas repudiated – A warranty is, on the other hand, a stipulationcollateral to the main purpose of the contract, the breach of whichgives rise to a claim for damages but not to a right to reject thegoods and treat the contract as repudiated – Whether a stipulationin a contract of sale is a condition or a warranty depends in eachcase on the construction of the contract – However, a stipulationmay be a condition, though called a warranty in the contract.Contract – Collateral contracts and collateral warranties –Discussed.
Judge	Hon'ble Ms. Justice B.V. Nagarathna
Neutral Citation	2023 INSC 533
Petitioner	M/s Tata Motors Ltd.
Respondent	The Deputy Commissioner Of Commercial Taxes (spl) & Anr.
SCR	[2023] 10 S.C.R. 1268
Judgement Date	2023-05-15
Case Number	1822

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